One of the newest certified B Corp businesses is right here in Northwest Arkansas: 8th & Walton, which offers training and advisory services for responsible suppliers trying to be better Walmart partners. B Corp certification is a third-party certification offered by B Lab. To become certified, companies must achieve 80 out of a possible 200 points that measure their sustainability, worker treatment, and community engagement.
Since B Lab’s inception in 2006, thousands of companies have become certified B Corps. But while B Lab does seem to focus its service on small and medium sized firms, there has been little research on how this certification impacts these small businesses, especially in rural areas. Moreover, rural areas are disproportionately engaged in entrepreneurial activities in the United States, but there has been no study exploring how these rural start-ups interact with the certification either.
Recently, two University of Arkansas professors, Scott Borden and Taryn Mead, interviewed the business owners and employees of rural businesses in Colorado that had or were pursuing certified B Corp status. In their jointly authored article, “Rural Small and Medium Enterprises: Maximising the Value of Benefit Corporation Certification,” they found that while none of these businesses could identify direct financial benefit from their certification status, business owners benefited in a variety of ways.
Borden and Mead said that most of the sources they interviewed believed B Lab’s process was better suited for their urban counterparts. Because of that, rural business owners faced some challenges and limitations when seeking certification. Even if they felt the certification offered them some value in attracting talent and establishing local relationships, several of Borden and Mead’s case studies ultimately decided the certification was not worth the effort or cost over the course of their two-year study.
Value of B Corp Status
Being a certified B Corp comes with some built-in brand loyalty. This interest comes particularly from white female Millennials and Baby Boomers, who tend to look for products with this certification more than other consumer segments. In general, certification appeals to consumers with higher education, environmental interests, and liberal political values.
Investors also like the B Corp status. According to the Yale Center for Business and the Environment, certified B Corp enterprises represent a unique, stable, though incredibly diverse, asset class that investors can rely upon because of the transparency and quality employees they attract. Moreover, during the 2008 financial crisis, certified B Corp enterprises saw continued revenue growth, in excess of 50%, when other sectors were deeply cutting back their expenditures and laying off millions.
A unique selling point of the certification is attracting talent. B Labs has a whole section on its website to match job seekers with hiring certified B Corp enterprises. In a survey of college students, earlier research has found that younger workers report a high desire to work with certified B Corp employers, giving businesses a competitive advantage when attracting quality employees.
But according to Borden and Mead, there is little peer-reviewed research on this topic, so it’s difficult to assess quite what the financial benefit is for certified B Corp businesses. In fact, the only survey that showed clear financial gains for businesses and investors was conducted by B Lab itself.
However, another option exists. In 37 states including Arkansas, businesses can apply to be a legally designated Benefit Corporation. This is a legal structure, and it isn’t vetted by a third party like B Lab’s certified B Corp designation. But it comes with far lower fees, capping out at $200 whereas B Lab charges between $500 and $50,000 depending on a business’s revenue.
There has also been some critical research on B Lab’s certification. The certification has been criticized as self-serving and undermining itself with its top-down approach. And others have argued that the certification has forced its definitions of values, social and otherwise, upon other community stakeholders in a move that greenwashes notions of corporate personhood.
What Value do Rural Stakeholders See?
Borden and Mead identified eight rural businesses in Colorado with a B Corp certification from B Lab or that were seeking such certification. These case studies represent about 6% of the certified B Corporation enterprises in Colorado, the state with the highest per businesses certification rate in the nation.
The researchers identified these businesses at a certified B Corporation presentation held in rural Colorado, and the businesses represent a diverse approach to the certification. Two ultimately decided to not seek certification out, two were recently certified during the interviews, two were in the process of renewing their certification, and one certified company chose to not renew their status.
Over two years and three rounds of interviews, the researchers found that “no businesses could identify direct financial gains from the certification.” Instead, all six of their certified sources said that they pursued the certification for personal, internal reasons. One businessowner, who operated the largest enterprise the researchers interviewed, even suggested that if you intend to use the certification as a marketing tool “it is going to vex you.”
The businesses told Borden and Mead, though, that the certification helped in other ways. It fostered B2B trust, attracted and helped retain good employees, and allowed them to join a like-minded community despite their rural, isolated locations. Many business owners also said that the certification made them feel like they were part of something bigger than themselves.
Borden and Mead’s sources all agreed that B Lab’s certification process was tailored for larger firms located in urban areas, and they felt like the two-year reassessment period was overly taxing on their time. Many cases said they had a hard time finding eco-efficient spaces to rent in their rural locations, and they also had fewer women-owned and other certified B Corps to work with. Similarly, the companies said they had a hard time hiring local, skilled labor because B Lab defines ‘local’ as within 50 miles.
The rural location also made it difficult for the companies to use green energy options because the only green energy source available to them was hydroelectric, which B Lab does not consider green for their assessments. And rural companies must rely on shipping more than their urban counterparts because there just aren’t local alternatives for some of their inputs. In sum, these difficulties make it much harder for rural enterprises to get the minimum 80 out of 200 points in B Lab’s criteria.
Cost was another major factor, especially since companies must be recertified every two years. Even at its lowest price, B Lab’s certification costs more than double the highest cost the legal Benefit Corporation filing fee costs. Both companies that ended up not pursuing the certification and the one that allowed their certification to lapse cited the cost as a primary issue for them. For one it was the fee itself, saying that they “could do something else with [the money].” For another, they said the cost of complying with B Lab’s stipulations by vetting their suppliers was too onerous and not a cost they felt comfortable passing onto their customers for their services.
Is the Effort Worth It?
Borden and Mead caution readers to not take their findings as prescriptive; rather, they intend their data to help rural, small- and medium-sized enterprises strategically decide whether B Lab’s certification is worth it for them.
All the business owners they interviewed said that they would undoubtably seek or retain their certification if they knew it meant customers would choose them over competitors. But as one owner said, so few of their customers even recognize the certified B Corp brand that they have to “spend a lot of time educating people.”
To get the most out of their certification, Borden and Mead say that rural businesses need to hustle to ensure the certification works for them. For example, several of their interviewees joined certified B Corp online communities and regularly travel to conferences for such companies. The researchers say that community building seems to help these business owners maintain their internal motivations that had initially encouraged them to apply for B Lab’s certification.
And because many of their customers do not recognize the certification, the researchers suggest leveraging the certification to attract and hire high-skilled talent rather than drum up business. This benefit is particularly attractive because rural businesses are already challenged by the rural workforce when it comes to specialized skills.
Borden and Mead’s research highlights the need for third-party certifiers like B Lab to remove the barriers in place that make it difficult for rural businesses to participate in these sorts of international movements. They say it’s probably worth redefining some of their assessment criteria, such as ‘local,’ specifically for rural applicants.
For most businessowners, the most important question will be “what is driving you to pursue a B Corporation certification?” If it helps you network with like-minded entrepreneurs and proprietors in the business community or communicate the values that make you an ideal workplace for prospective employees, then it is probably worth considering. Borden and Mead’s data suggests that at least for the time being, the certification will do you more good on the B2B and HR front than it will attract customers. Borden and Mead aim to tackle this exact question with their next research, so stay tuned for more.
